Those who attended the Cranbrook and District Chamber of Commerce luncheon Wednesday were given an update on positives and challenges facing Tembec, which is a major economic driver of the area.

Troy Hromadnik, RPF Vice President, B.C. SPF Operations with Tembec, went over Tembec's foray into China, how the disaster in Japan has affected the company, how local plants are faring, and how the U.S. housing market continues to affect business.

Hromadnik said the local pulp mill and saw mills are doing well and the outlook for those going forward is very positive.

"The regional synergies between the pulp mill and our saw mills is critical, we supply a large portion of the chips required at that site and through our internal sources and as a result Skookumchuck is going to run and as a result our saw mills are going to run," he said. "We don't foresee any down time in the coming months as long as the prices stay where they are."

The Cranbrook finger joint plant is linked closely to the housing market in the United States, which is still struggling, and Tembec does not plan to open it or the planer mill this year.

"The finger joint plant is a great facility. The problem with the finger joint plant now is that producing its product is tied almost exclusively to new homes in the U.S.," Hromadnik said. "The American economy hasn't turned around enough, we're still seeing annualized home construction from 400,000 to 500,000 a year. We need a number from 1.2 million to 1.5 million to start looking at that facility again."

Hromadnik said Tembec's foresters have done an excellent job of minimizing the destruction wrought by the mountain pine beetle on area forests. This means when the American housing market does turn around Tembec will have access to the quality wood that can be sold for use in that industry.

"At some point the economy is going to turn around, people will start getting jobs, the banks will give credit to these young people who want to build houses," he said. "That's going to be great for our business and on top of that if you increase sales to China and other foreign markets, with an increase in the US, B.C.'s and Canada's lumber is going to be in very high demand."

Tembec plans on maintaining low-grade sales to China and with changes to the building code in China allowing for wood to be used it is exploring selling high-grade products there.

"Now that we know we can sell our product in China, we need to keep our finger on the pulse of where the country is going with developing infrastructure in China and to move forward with governments, whether it's the B.C. government or the government of China and ask how we can supply the products they need and what do they want us to supply to areas that traditionally had no access," Hromadnik said.

He gave most of the credit for changing the building code in China to the B.C. provincial government. Kootenay East MLA Bill Bennett said it was something the government worked at for many years.

"The first thing we had to do was go over there and show them - literally we built a small neighbourhood of wood frame houses in one of their cities to show them what they look, like, what they're like to live in and stuff like that," Bennett said. "We had to work with their universities to get them to convince their government to change the building code. We did that, and it took several years to get there.

"What it does is remove the reliance of our B.C. forest industry on the U.S. economy, which has traditionally been our Achilles heel in the forest industry. When the U.S. economy is down, our forest industry is down so if we can spread our markets out and diversify away from the States we can avoid those wild fluctuations in the forest industry."

Hromadnik showed some photos of the port where Tembec products would usually be shipped to and people in the audience gasped at the level of destruction. Shipping containers had been tossed around and the control office was destroyed.

He said Tembec has not sold anything to Japan since the earthquake and tsunami hit and the company has a six month plan to divert wood to other Asian markets until Japan is ready to resume purchasing products.